Ukraine Escalation Hurting EUR, Benefitting USD
AUD
The Aussie dollar is trading up against the majority of its peers this morning, however has gapped significantly lower against USD as markets re-price the Ukraine developments over the weekend. In local equities the ASX closed up a meagre 0.1% and other Asian equities followed suit with the Shanghai Comp closing up 0.6%. Commodities continued to be supportive of AUD, showing gains with Iron Ore & Copper closing up 0.7% & 0.9% respectively. Looking ahead there is a slew of data being released locally which will be kicked off with the monthly MI Inflation survey, followed by monthly Retail Sales figures. Tomorrow is the RBA's next monthly meeting, at which they are expected to leave interest rates unchanged at 0.1%. From his recent speeches, RBA Governor Lowe is likely to remain upbeat on the outlook but ‘patient’, and of course flag the uncertainties surrounding the Russia-Ukraine situation. Looking further ahead, local GDP for the quarter is will be released later this week which will be a key indicator of Australian economic health post Omicron.
USD
AUDUSD has suffered a sharp 40 basis point loss at open this morning and is trading at 0.7186 currently. This violent opening movement is indicative of the market pricing in developments since the close early Saturday morning, obviously risk has taken a hit since then. The tone from world leaders has not been conducive to reconciliation, more leaning towards escalation which is to the benefit of the Safe Haven USD. Wall Street closed up on Friday with the Dow Jones leading the way and gained 2.5%, while the S&P 500 and the NASDAQ closed up 2.2%, and 1.6% respectively. Based on the safe haven flows seen in currency markets this morning, one would think Equities are about to have a tough start to the week as well. The US data for the week ahead is dominated by two speeches from Fed Chair Powell as well as the official monthly Employment Report on Friday night. In any other week this would be the main event, however data is taking a back seat to the conflict in the Ukraine.
EUR
AUDEUR is trading at 0.6448 this morning and finding itself at its highest level since November. The detrimental effect to the EUR of armed conflict in Europe is currently outweighing the risk-related detriment to the AUD, allowing AUD to forge ahead. There was no news of note however ECB President Lagarde was on the wires saying that the central bank was ready to take whatever action was required for price stability and noted there would be a comprehensive assessment assessed at the March meeting. European equities have also priced in any market shocks from Ukraine and sharply rebounded with the DAX & CAC closing up 3.7% & 3.5% respectively. Looking ahead Spanish Flash CPI for the year will be released. EZ economic data is sparse this week but plenty for markets to grapple with as the events in Ukraine unfold.
GBP
AUDGBP is opening higher at 0.5381 this morning after retracing an initial sharp dip on the open. Although there was no news of note released into the weekend in the UK, the tougher rhetoric by Prime Minister Johnson over the weekend regarding the situation in Ukraine may have been a driving factor in market movement. However, UK Equites saw similar gains to its other European counterparts with the FTSE closing up 3.9% and seemed to recovered from the initial market shock. There is almost no data from the UK for the week ahead, the Ukrainian situation front and center.
NZD
AUDNZD is trading at 1.0720 this morning after seeing sharp volatility on the open. AUDNZD is gapping around heavily this morning in the low liquidity environment. Looking ahead today, ANZ will release its NZ business confidence report.